BOI official: Auto sector may get incentive support

MANILA, Philippines - The Board of Investments (BOI) is reviewing tax perks and other incentives for the automotive industry in a bid to eke out flat to 4% growth in local sales this year, an official said Wednesday. Measures to avert retrenchments in the industry are also being studied, BoI Managing Head Elmer C. Hernandez said at Honda Cars Philippines, Inc.’s launch of its new City subcompact sedan. The Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI), meanwhile, recommends that such measures include government assistance to local assemblers and parts makers, and efforts to stabilize the exchange rate and ease credit for firms and consumers. CAMPI has forecast growth of just 2-4% or even flat this year. Latest data as of November 2008 showed domestic sales up 8.3% to 114,564 units. "The year 2009 is critical for the entire business sector and even more daunting for the automotive industry ... BoI is studying measures that may be adopted by government," Mr. Hernandez said. "[These are] in terms of incentives, both fiscal and non-fiscal, and [measures] how to address possible layoffs," he told reporters at the sidelines of the event, declining to elaborate. The move, Mr. Hernandez said, is in line with government’s ongoing review of the Motor Vehicle Development Plan, a comprehensive support roadmap for the automobile industry which includes measures such as a ban on imported used vehicles and tax perks for local assemblers and motor parts manufacturers. "We are getting input from the concerned sectors and industry players ... and we await the results of the Deloitte study [commissioned by CAMPI]," he said. Asked to comment, CAMPI President Elizabeth H. Lee said in an e-mail to BusinessWorld: "Assistance to help grow the local auto industry where it promotes the interest of the entire industry is welcome ... In particular, assistance in strengthening the local assembly operations in the country is imperative while at the same time, providing for all other auto sectors (non-assembly) to grow as well." The assistance Ms. Lee recommended includes "open dialog" for a plan of action, preventing volatile peso movements to aid in the purchase of components, and improving liquidity in the market. "The financing environment is very important for the auto industry and consumers in general," she said. Ms. Lee has said that the government could help by limiting state purchases to locally made units, having public-utility vehicles upgraded, and stricter implementation of the ban on second-hand imports. Toyota Motor Philippines Corp. (TMPC) Corporate Affairs Vice-President Rommel R. Gutierrez, for his part, said in a telephone interview Wednesday: "It’s good news. We really don’t know [what specific incentives to ask for], but the bottom line is it should support local assembly and sustain production." TMPC has said it is expecting a flat sales growth in 2009, versus 7% last year. "[But] we have no plans to halt production as of this time," he said, even as its parent company has ordered an 11-day shutdown for plants in Japan. "Japan production is separate and distinct from Philippine operations ... and components for local assembly are imported mostly from the ASEAN (Association of Southeast Asian Nations)." Honda Cars Philippines, Inc. (HCPI), for its part, will sustain 2008’s production volume of roughly 11,000 units, HCPI President Hiroshi Shimizu told reporters. "[And] there will be no layoffs this year," Mr. Shimizu said, noting that HCPI expects at least a 10% sales growth this year versus a 17% drop to 14,300 units in 2008.